Oil prices slid into bear-market territory on Monday, highlighting investors’ growing concern that China’s deadly coronavirus will hurt the global economy, reducing demand for gasoline, diesel and jet fuel in an already well-supplied market.
The declines capped an eventful day in markets. Chinese leader Xi Jinping delivered a speech Monday describing the outbreak as a major test of the country’s system of governance and vowing consequences for officials who shirk responsibility in tackling the crisis. American health authorities, meanwhile, reported a second case of the coronavirus being passed from one person to another in the U.S. as they raised the number of the nation’s confirmed cases to 11.
The prospect of canceled flights, closed international borders, locked-down cities and idled factories in China, which is the world’s biggest oil importer, have rattled financial markets in recent sessions, sparking swings in stocks, bonds and commodities around the world. Many investors remain braced for greater volatility ahead.
The magnitude of the concern is such that Saudi Arabia’s push for further production cuts among OPEC members failed to buoy oil prices on Monday. Though prices briefly ticked higher after The Wall Street Journal reported that Saudi Arabia was advocating a short-term curtailment to combat declining demand related to the outbreak, they quickly resumed their fall.
Global and U.S. prices finished Monday in bear-market territory, generally defined as a 20% decline from a recent peak. The tumble marked a rapid reversal from just three weeks ago, when escalating tensions in the Middle East drove international prices above $70 a barrel.
Brent crude, the main international price, closed 3.8% lower at $54.45 a barrel after being down more than 6% earlier in the day. West Texas Intermediate, the U.S. price gauge, briefly traded below $50 a barrel for the first time in more than a year, and settled down 2.8% at $50.11. U.S oil prices have shed nearly $11 a barrel to start 2020.
While the decline could give a boost to U.S. motorists, the health crisis is weighing on both stocks and bonds issued by domestic energy companies and straining faraway oil-exporting nations, as reduced refining demand hits the prices they can charge for crude, as well as their revenue.
Representatives of the Organization of the Petroleum Exporting Countries and its allies are set to meet Tuesday and Wednesday to debate possible action after the outbreak originating in China. The group could then make a decision to reduce output at a possible meeting next week.
Under one scenario, Saudi Arabia would lead a collective reduction of 500,000 barrels a day that would stand until the crisis is over, the OPEC officials said. That would add to curbs of the same amounts agreed to in December and bring the restrictions to 2.2 million barrels a day.
Another option under consideration would involve a temporary cut of 1 million barrels a day by the Saudis, aimed at creating a shock in oil markets, the officials said. The kingdom currently produces around 9.7 million barrels a day.
A cut of “500,000 barrels is far from enough but it’s typically good for OPEC to be involved with tactical cuts,” said Bjarne Schieldrop, an analyst at Sweden’s SEB Markets. “The first numbers out of China show losses to demand of three million barrels a day, and the extent of the virus is still unfolding. We’re nowhere near stabilization.”
Vienna-based energy consulting firm JBC cut its forecasts Monday for China’s oil consumption by one million barrels a day in February and March, amid signs refiners in the country have reduced their oil intake. Prospects of weakening demand contributed to a 15% decline in oil prices in January.
Related Video
Saudi officials fear that mounting oil revenue losses threaten their efforts to diversify their economy. The kingdom—whose largest oil buyer is China—relies on high oil prices to fund new projects in tourism, real estate or petrochemicals. While Saudi Arabia’s expenditure fell this year by 2.6% to 1.02 trillion riyals ($272 billion), oil prices significantly above $60 a barrel are needed for a balanced budget.
In January, the International Monetary Fund downgraded Saudi Arabia’s economic growth forecast for 2020 by 0.3 percentage points to 1.9%, amid concerns that OPEC’s previously agreed-upon production cuts would have little impact on oil prices.
December’s initial public offering of state-run Saudi Arabian Oil Co., known as Aramco, was seen by Saudis as the most prominent symbol of attempts to diversify the national economy. Since Jan. 9, however, Aramco’s shares have lost 3%.
Iran, which had initially objected to an emergency meeting, is open to a mid-February summit, Iranian Oil Minister Bijan Zanganeh said Monday, according to Iran’s state-controlled news agency, IRNA.
Energy Journal In Your Inbox
Get a Monday morning jolt of insight and analysis on the global energy business, with our Energy Journal newsletter. Sign up.
Corrections & Amplifications
The coronavirus outbreak contributed to a sharp drop in crude prices. An earlier version of this article incorrectly said the monthly price decline in January was the worst in 30 years. (Feb. 3)
—David Hodari and Ryan Dezember contributed to this article.
Write to Summer Said at summer.said@wsj.com and Benoit Faucon at benoit.faucon@wsj.com
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
"street" - Google News
February 04, 2020 at 05:59AM
https://ift.tt/2u59PGc
Oil Prices Slide Into Bear Market on Coronavirus Concern - The Wall Street Journal
"street" - Google News
https://ift.tt/2Ql4mmJ
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
No comments:
Post a Comment